Stable domestic propylene supply needed for industry: ITRI

TAIPEI--Taiwan's industry needs a safe and stable supply of domestically produced propylene due to the cost of importing the byproduct of oil refining, a researcher at Taiwan's Industrial Technology Research Institute (ITRI, 工研院) said Tuesday.

Taiwan's overall demand for propylene, an important building block for a large number of chemicals, is estimated at around 2.5 million to 2.6 million metric tons per year, according to Tseng Fan-ming, division administrator at the materials and chemical industrial division of ITRI's Industrial Economics and Knowledge Center.

He said that most of Taiwan's propylene is produced domestically, while only 200,000 to 300,000 metric tons, or roughly 10 percent of the country's annual demand, is imported.

"The demand is there," Tseng said. "It will be a big problem to handle such a huge amount of demand if we try to reduce local supplies and increase the ratio of imports."

Propylene is the raw material for a wide variety of products. It is needed, for example, for coatings and detergents, and even for super-absorbents for diapers.

Due to the costs associated with shipping propylene, using imports is more expensive than purchasing from a local producer, Tseng said.

The cost of producing propylene in Taiwan is about US$1,200 per metric ton, while imported propylene costs US$1,500 per metric ton or more, he said.

It is also difficult to purchase propylene from the global spot market because most of the global propylene trade is planned before production, the researcher said.

That means the best solution to meeting local demand is to ensure a safe and stable local supply, Tseng said.

The researcher's remarks came a few days after a series of propylene-fueled explosions in Kaohsiung's Cianjhen and Lingya districts July 31 that killed at least 28 people and injured over 300.

Takato Watabe, an analyst with Morgan Stanley MUFG Securities Co., said the tragedy could raise concerns relating to safety in production and transportation of petrochemical products.

"We understand that some firms have already suspended plant operations on safety grounds, and believe that a full spate of suspensions will inevitably impact the petrochemical market," Watabe wrote in an Aug. 1 note to clients.

He did not give any financial estimates for the likely impact of the suspensions on the petrochemical market.